Legal Forms of Running Business by Russian Entrepreneurs in China
Abstract
The article considers the issues related to the legal regulation of establishing enterprises with 100% Russian capital and Russian-Chinese enterprises on the territory of the People's Republic of China. The establishment of enterprises with 100% Russian capital is studied on the example of a company with limited liability. This legal form is most frequently chosen by Russian entrepreneurs as it is identical formally to the widespread in the Russian Federation limited liability company. However, despite the similarities, a limited liability company in China and a limited liability company in Russia have a number of substantial differences which have been identified in the comparative analysis of the principal legal characteristics of these entities and are seen in a different order of formation and the size of the share capital, organization of management etc. These differences should be taken into account by Russian investors to minimize risks and avoid misperception on the legal aspects of doing business in China. The paper also discusses regulatory features of establishing joint Russian-Chinese enterprises which are of two types — contract (cooperative) joint ventures and share joint ventures. The conducted research allowed revealing the advantages and disadvantages of each form of doing business in question by Russian businessmen in China. For example, establishing an enterprise with 100% Russian capital is quite a lengthy and costly (a large size of the authorized capital) process, but the advantages are a convenient control system with the possibility of delegating powers to the employees, the ability to select the co-founders irrespective of nation, in addition to Russia, the risk of loss of property only to the extent of the share in authorized capital makes it attractive for Russian investors. In case of unwillingness or lack of financial ability to run an individual business, China's domestic investors may join such a venture selecting one of the two types of joint ventures. Share joint ventures run is subject to the law. Contractual joint ventures are largely governed by the agreement on contractual enterprise.
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